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Banks Win Dismissal of Libor Antitrust Claims

B of A, Barclays and JPMorgan Chase among banks; judge allows some commodities-manipulation claims to proceed.

Banks including Bank of America Corp., Barclays Plc and JPMorgan Chase & Co. won dismissal of antitrust claims in lawsuits alleging they rigged the London interbank offered rate.

More than two dozen interrelated lawsuits are before U.S. District Judge Naomi Reice Buchwald in New York alleging the banks conspired to depress Libor by understating their borrowing costs, thereby lowering their interest expenses on products tied to the rates. Potential damages were estimated to be in the billions of dollars.

Buchwald yesterday issued a 161-page ruling dismissing antitrust allegations against the banks while allowing some commodities-manipulations claims to proceed to a trial.

“We recognize that it might be unexpected that we are dismissing a substantial portion of plaintiffs’ claims, given that several of the defendants here have already paid penalties to government regulatory agencies reaching into the billions of dollars,” Buchwald wrote. “There are many requirements that private plaintiffs must satisfy but which government agencies need not.”

Libor is a key metric for setting interest rates for trillions of dollars in financial instruments. It fixes the rates under which banks lend money to one another for as little as a day and as long as a year. Rates for 10 different currencies including the U.S. dollar, Japanese yen and British pound are computed daily after canvassing banks that comprise membership panels for each type of money.

Global authorities have been investigating claims that more than a dozen banks altered submissions used to set benchmarks such as Libor to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier.

Barclays agreed to pay 290 million pounds ($441 million) and Royal Bank of Scotland Group Plc paid $612 million to U.S. and U.K. regulators to resolve claims. UBS AG agreed to pay 1.4 billion Swiss francs ($1.47 billion).

Buchwald dismissed the antitrust claims because the plaintiffs didn’t allege enough facts to show that they were harmed by the alleged misconduct. The judge dismissed some commodities-manipulation claims because they centered on transactions that were too long ago. Other such claims may proceed, she said.

Explaining her decision to dismiss the claims after the regulatory settlements, Buchwald said private cases must be “examined closely” to ensure plaintiffs are “properly entitled to recover and that the suit is, in fact, serving the public purposes.”

“The broad public interests behind the statutes invoked here, such as integrity of the markets and competition, are being addressed by ongoing governmental enforcement,” she said.

Lawrence Grayson, a spokesman for Charlotte-based Bank of America, and Kristin Lemkau, a spokeswoman for New York-based JPMorgan, declined to comment on the ruling.

The plaintiffs include Charles Schwab Corp., the independent brokerage, and bondholders. Michael Hausfeld, a lawyer for the plaintiffs, didn’t immediately return an e-mail yesterday seeking comment on the decision.

The consolidated case is In re Libor-Based Financial Instruments Antitrust Litigation, 11-MD-02262, U.S. District Court, Southern District of New York (Manhattan).

Bloomberg News

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